VICTOR JOECKS: Hollywood handout would hike Las Vegas housing prices
If you’re concerned about housing affordability in Las Vegas, you should be opposed to handouts to Hollywood.
If you’re concerned about housing affordability in Las Vegas, you should be opposed to handouts for Hollywood.
On Tuesday, the Senate Revenue and Economic Development Committee had a hearing on Senate Bill 496. It would offer $4.6 billion in tax credits to film producers over the next 25 years. The amount of new credits would start at $45 million annually and ramp up to $100 million and growing in 2028. In 2035, they would top $200 million and then hit $270 million in 2048.
If passed, various companies have said they will build two production facilities in Las Vegas. One would be on property owned by UNLV near Interstate 215 and Durango Drive. The other would be in Summerlin. It’s likely the combined costs of those projects would top $1.5 billion.
The upside is easy to see. Diversify the economy. Bring Hollywood to Las Vegas. Sony Pictures Entertainment would help run the Summerlin facility. More exposure and publicity for Las Vegas in movies.
There are two obvious problems, though. One, it’s unjust for the government to pick winners and losers in the economy. Taxes are supposed to fund governmental services and help officials fulfill constitutional obligations, not be funneled to favored industries. Two, similar schemes in other states haven’t panned out financially. The credits would be transferable, which makes them function like a de facto subsidy. Say Sony receives $40 million in transferable tax credits. It could sell those credits to MGM for $35 million. Sony would receive $35 million in cash. MGM would have spent $35 million to pay a $40 million tax bill. That’s great for the companies but terrible for taxpayers.
But consider two less obvious reasons to oppose this.
Las Vegas rents are finally coming down. It’s supply and demand. New multifamily units are increasing in supply. Demand is dropping, notably from those who are out of state. Naturally, prices are falling. It’s good to see the overheated rental market cool. Letting the market work is a better way to lower rental costs than misguided rent-control efforts. Housing prices have been dropping for months, in large part due to rising interest rates. It’s another example of dropping demand bringing prices lower.
But think about what happens if politicians artificially stimulate Las Vegas’s economy with these subsidies. The point is to bring a new industry and residents to town. If successful, it will increase housing demand — boosting prices and rents. Plus, there will be less tax revenue in future years to pay for education, roads and public safety. Not great.
The second reason is political. Hollywood is one of the most liberal industries in the country. Its stars routinely fundraise and work to elect Democrats. Republicans would be extremely shortsighted to give away nearly $5 billion to lure that industry here.
If Hollywood studios want to escape high-tax California, let them pay their own way. Maybe that will help them realize it would be a mistake to support the policies here that drove them out of there.
Victor Joecks’ column appears in the Opinion section each Sunday, Wednesday and Friday. Contact him at email@example.com or 702-383-4698. Follow @victorjoecks on Twitter.